From Brasilia to Beijing: Reconsidering China as An Investment Destination
Germana Cruz, CEO and Head of Financial Institutions, Latam
Diversity is a key driver of everything we do at Standard Chartered – from the diverse markets where we operate, to the diversity of thought and innovative ideas shared by our people. And helping our clients find the right balance of diversification in their investment strategy is also an important way we are able to add value, supporting them as they evolve, grow, and navigate an ever-shifting economic climate.
But we recognize that diversification often means, at one point or another, expanding into new markets, which can seem intimidating at first. When we look beyond our own borders there are of course specific regulatory considerations to adapt to, and it is often necessary to be able to operate across different time zones, in a different language or with specific jargon. Having a trusted partner bank, with deep knowledge of the world’s foremost investment markets, as well as an on-the-ground presence in those markets, is an important consideration for investors who want to understand the potential opportunities and be able to act in a timely way.
We are extremely proud to have recently been named Best Renminbi Bank in Brazil at The Asset Triple A Awards 2021, recognizing our capabilities with supporting clients to access China and its financial markets, such as the China Interbank Bond Market (CIBM). While Brazilian investors and family offices might typically be more familiar with another global bond market somewhat closer to home – the United States – China boasts the world’s third-largest bond market and represents an opportunity to diversify from dollar-denominated investments into renminbi, an increasingly stable currency.
As China continues its journey towards economic liberalization, there are a variety of other financial instruments for overseas investors to explore. These include investing in Chinese fixed income securities via the Qualified Foreign Institutional Investors (QFII) and RMB Qualified Foreign Institutional Investors (RQFII) schemes, both of which have become more accommodating in recent years by scrapping investment quotas. With teams in the United States and in China, as well as our representative office in Brazil, we are able to provide clients with around-the-clock support for their CNY and CNH FX-hedging requirements, swaps, and trades, alongside other G10 currencies – a one-stop-shop for yield-hungry investors to flex their exposure as needed.
Despite the disruption caused by the coronavirus pandemic in the last 18 months, China’s bond market has continued to see healthy inflows and, with the presidential handover in the White House, a return to a more familiar foreign policy stance for the United States as regards China is likely to build further confidence in Chinese fixed income. Chinese government bonds (CGBs) are also set to join the FTSE World Government Bond Index (WGBI) in a few months’ time, indicating that new opportunities in the region will continue to present themselves – and further demonstrating the need for investors to remain up-to-date with the latest regulatory and market developments.
Diversifying an investment strategy to accommodate a new market, particularly one on the other side of the world, naturally requires a certain level of expertise, strong relationships with regulatory bodies, and meaningful knowledge of both domestic and international rules and complexities. With more than 160 years of operations in China, and nearly 120 years in the Americas, Standard Chartered is well-placed to support Brazilian businesses realize their growth aspirations in China, and demonstrate why it has been singled out as the renminbi bank of choice here in Brazil.